Balloon Payment
Also called: balloon loan, bullet repayment
A balloon payment is a large lump sum due at the end of a loan whose regular payments were too small to repay it. It buys a low monthly payment by deferring most of the principal — common in commercial mortgages, some car finance and short-term business loans. The risk is refinancing risk: the plan is almost always to refinance or sell before the balloon lands, and that plan fails exactly when credit conditions tighten or the asset's value has fallen.